Can Yahoo's Yang Survive as CEO?

Yahoo (YHOO) got its wish. Microsoft (MSFT) is no longer a possibility as a purchaser. The company improves short-term results by partnering on search with Google (GOOG). Carl Icahn may give up on his proxy war. And the company lives to fight another day–or at least until Aug. 1 when shareholders unleash their collective rage at Yahoo’s annual meeting.

The larger question: Can Yahoo CEO Jerry Yang survive? The Friday morning quarterbacking can be summed up with one word: Brutal.

I’ve been batting this question back and forth with Dan, who notes that Yang’s tenure is just about a year old and it has been non-stop chaos. Using the “what doesn’t kill you makes you stronger” theory, Yang must be a helluva leader by now. Ultimately Dan concludes there’s a battle for Yahoo’s soul going on.

But even if Icahn walks away, the battle for Yahoo’s soul won’t be over for Yang as he tries to maintain control of the company he founded in March 1995 with fellow Stanford graduate student David Filo. The fight doesn’t get any easier from here as key executives abandon ship, products continue to be slow to get to market and uncertainty hangs over Yahoo’s Silicon Valley campus. In the immediate wake of the Microsoft out, Google in announcement, Yahoo’s stock has slid 15 percent

Yang might be called a reluctant CEO, and this tangled scenario can’t what the 39-year-old Yang imagined when he replaced Terry Semel as CEO almost a year ago, on June 18, 2007.

Dan notes that Yang has some time, but he has a short runway to deliver. But I question how much time Yang really has. I’d guess that Yang’s tenure may be a matter of months following the Microhoo saga.

Patience isn’t a virtue on Wall Street. Yahoo employees, who have options tied up in the company, can’t appreciate Yang nuking their paper wealth. And morale can’t be good when you’re partnering with the enemy Google in some co-opetition agreement that will likely give the search giant more of an edge.

How do you value Yahoo’s soul? If you’re a shareholder Yang is a disaster.

• Yang left a $31 a share and $33 a share offer on the table.
• Yahoo shares are headed to the high teens–$18ish a share is the line in the sand.
• Yang does a deal with Google that buys the company some time, but may have mortgaged the company’s future.
• Sanford Bernstein analyst Jeffrey Lindsay reckons that the Google deal is only worth 16 cents a share in 2009 earnings. That sum roughly equates to $3 a share, bringing Lindsay’s target price to $27, well below Microsoft’s final $33 a share offer.
• Yahoo’s deal with Google provides a few outs in the event of a change in control, but does deter all of the potential suitors of the company. An SEC filing names Time Warner, News Corp. and Microsoft.

Add it up and you have Wall Street questioning the Google deal. Employees worried about leadership leaving. A thin management bench. And at least a year in the penalty box for Yang. It’s doubtful that Yang can recover from this debacle.

Comments

[Rfriedenberg:]

If Yang were Samurai and not a Taipan, he couldn't live with his shame.

2008 Jun 15 04:15 PM

[dcw:]

What shame? He skillfully avoided capture from a destroyer of companies that is Microsoft -Balmer and possibly avoided a liquidator Icahn-the-Great.

2008 Jun 15 06:53 PM

[CONTRAPUNTOSTV:]

Dear Mr. Dignan:

An old saying is to fit somebody else pants. Neither you or me are negotiating with MSFT's Balmer. Jerry Yang cares about his company value. In only one week he has returned back to very important deals with Walmart, Adserve, and CBS, among others that I remember.

Yes it has hurt my investments in Yahoo stock, but faith and pondered analysis of what I see is a comeback for Yahoo. Stock will go back to the $35.00 mark in short. I give Jerry my humble support.

Sincerely,

Carlos Rosso,
editor of CONTRAPUNTOS
San Juan, Puerto Rico

2008 Jun 15 07:46 PM

[CONTRAPUNTOSTV:]

Dear Mr. Dignan:

An old saying is to fit somebody else's pants. Neither you or me are negotiating with MSFT's Balmer. Jerry Yang cares about his company value. In only one week he has returned back to very important deals with Walmart, Adserve, and CBS, among others that I remember.

Yes it has hurt my investments in Yahoo stock, but faith and pondered analysis of what I see is a comeback for Yahoo. Stock will go back to the $35.00 mark in short. I give Jerry my humble support.
Sincerely,
Carlos Rosso, editor
CONTRAPUNTOS
San Juan, Puerto Rico

2008 Jun 15 07:50 PM

[CONTRAPUNTOSTV:]

Dear Mr. Dignan:

An old saying is to fit somebody else pants. Neither you or me are negotiating with MSFT's Balmer. Jerry Yang cares about his company value. In only one week he has returned back to very important deals with Walmart, Adserve, and CBS, among others that I remember.

Yes it has hurt my investments in Yahoo stock, but faith and pondered analysis of what I see is a comeback for Yahoo. Stock will go back to the $35.00 mark in short. I give Jerry my humble support.
Sincerely,
Carlos Rosso, editor
CONTRAPUNTOS
San Juan, Puerto Rico

2008 Jun 15 07:50 PM

[TA:]

LOL dcw! The only thing he skillfully avoided was the upside MSFT provided on the overpriced buyout.

This is all about money(why else do you buy a stock?), not ego or tech prejudice. Yang forgot that and he shall be paying for this in short order.

2008 Jun 15 09:05 PM

[bato sa bato:]

Jerry has done everything to keep the company from falling into Ballmere's hand. Now it's time to prove that he did the right thing and put some earnings into the hands of his shareholders .The last thing he needs is to fall prey to his own stock holders.

2008 Jun 15 09:13 PM

[Deep Value:]

Hopefully we'll still be able to get $33 after Carl does some house cleaning. The only thing keeping the stock about $20 is takeover speculation.

Jerry Yang is officially unemployed.

2008 Jun 16 01:11 AM

[dcw:]

blah-blah: You see the short and maybe very brief rise if it goes through. If a brief rise is your objective then that is the way to go. In the long run it probably may not be the best for either co. YaHoo has a great potential to excel under Jerry and 'its happy staff.' Every business has its cycle.

2008 Jun 16 10:04 AM

[dcw:]

blah-blah: FYI, I do not own YaHoo, MFST or Google. My opinions/observations are not dictated by financial issues, ego or tech prejudice. I see MSFT under 'Balmer management style' as unhealthy to innovation.

2008 Jun 16 10:17 AM

[The Hudson Guy:]

blah-blah is right. There is only one reason you buy and sell stocks and that is to make money. If you see or 'feel' that there is some greater cause here then you are in the wrong business. Go find some feel good cause like saving the rain forest to scratch that itch. As far as I see it Mr. Yang put his own self interests above that of his shareholders.

2008 Jun 20 04:31 PM

[dcw:]

The Hudson Guy. Again with the personal attacks. I'm glad you decided that there is only one reason to buy stocks... I'm sure you represent the opinions of everyone.

2008 Jun 28 06:45 AM

[dcw:]

The Hudson Guy: It is my opinion that an innovative company is a profitable in the long run, and Jerry is that individual that sets the tone from the top down.

As good example is Apple, look at their stock price ten years ago versus current price, after Job's returned. Jerry is facing the a similar challenge from MSFT and Ichan. Investors who is looking for short term gain, such as Apple years ago when Jobs lost control, does harm to a company. You assume self interest is bad but for the investor, but in this case it is not. Every business has its cycle, in my opinion, YaHoo's value is greater than its parts.

dcw

2008 Jun 28 07:18 AM

[User 220207:]

Yahoo needs to get rid of Yang. This guy is just not fit for his job. also, yahoo has been falling behind for quite some time now because mr. smart and his subprime nerds were unable to deliver innovation aka transformed intelligence.

2008 Jul 01 08:50 AM